On 6 March 2011, a collision occurred between the vessels Theresa Libra and MSC Pamela. On 11 March 2011, the owners concluded a Collision Jurisdiction Agreement referring all disputes to the English courts in accordance with English law and practice.

On 17 October 2012 the owners agreed to settle liability for the collision based on the assessment that the MSC Pamela was 75 per cent and the Theresa Libra 25 per cent to blame. The formal agreement to settle liability was concluded and signed on 25 October 2012. The settlement agreement provided that the parties 'shall pay' in accordance with this proportion for the costs of determining liability and the claim as proved or agreed. If the parties failed to agree on the quantum of the claim, the dispute would be referred to the Admiralty Registrar, who would assess the respective claims.

On 8 April, the claimant owners of the Theresa Libra issued a claim against the defendant owners of the MSC Pamela. The defendant contended that the claim was time-barred pursuant to s 190 of the Merchant Shipping Act 1995 (UK) (the Act). It submitted that the obligation that each party 'shall pay' was dependent upon proceedings having been commenced within the two-year limitation period stipulated by s 190 of the Act.

The claimant argued that its action against the defendant was not time-barred and that the demise charterer of the MSC Pamela should be added as a defendant. The application to add the demise charterer as a defendant was opposed on the grounds that it was made after the end of the limitation period, and, therefore, the condition set out in CPR 19.5 was not satisfied.

Held: The Court found in favour of the claimant.

The settlement agreement is not stated to be subject to a condition that a party can only enforce it if it issues the proceedings within the two-year period. However, it might be said that this condition does not have to be expressed because it is provided by s 190 of the Act.

Teare J found that the construction that each party 'shall pay' would be inconsistent with an option not to pay in the event the claim was not submitted within the two-year limitation period. The Act provides for a two-year time bar, but a shipowner may waive its right to rely upon it. In Teare J’s view, the parties to the settlement agreement did so.

The settlement agreement consisted of the provision that in case the parties failed to agree on the quantum of the claim, they might refer this issue to the Admiralty Registrar. This would also necessarily entail commencement of proceedings. However, Teare J did not consider that the respective circumstance enabled the parties to rely upon the fact that the proceedings were commenced more than two years from the date of the collision in order not to pay.

Teare J further considered the issue of the extension of time in case his conclusion on the meaning of the settlement agreement was wrong. The jurisdiction to extend time is provided by s 190(5) of the Act. The Judge applied the two-step test set out in The Al Tabith and Alanfushi (CMI2489).

The first stage is to determine whether a good reason for an extension of time has been made out.The parties had settled the dispute, and there was no need to commence proceedings. They would expect to consider and agree on quantum and costs. The applicant provided the claim and vouchers to the defendant on several occasions and requested the defendant's documents but did not receive an answer. Teare J found that where a claim has already settled, negotiations which then ensue over quantum and costs may be a good reason for extending time, even though the settlement negotiations themselves usually would not be considered a good reason.

The second stage is whether it is appropriate to extend time in the exercise of the court’s discretion. Teare J found that the required extension is modest, since it is only a little more than a month delay. Also, this extension will cause no hardship to the defendant. It was not submitted that the delay in the commencement of proceedings made it more difficult to investigate the claimant's claim or prove the defendant's claim.

Therefore, Teare J concluded that it would be unjust and unfair if the applicant

having settled liability well within the two-year limitation period, having secured the agreement of the owners of MSC Pamela to pay 75 per cent of their damages and having promptly sought to exchange claims and supporting vouchers with a view to agreeing quantum, should now be unable to enforce the obligation to pay assumed by the owners of MSC Pamela.

As for the application to add the demise charterer as a defendant, the Judge concluded that since the effect of the settlement agreement is to preclude the parties from relying upon the limitation period provided by s 190 of the Act and the demise charterer was a party to this settlement agreement, the demise charterer can be added to the proceedings as a defendant.

If time were extended pursuant to s 190(5) of the Act, the conclusion should be the same. Teare J said that it would be irrational not to consider the time extension when deciding whether the case falls within the limitation period restriction of CPR 19.5. The extension is permitted pursuant to s 190 of the Act, the very section on which the demise charterer would have to rely, saying that the application was made 'after the end of the period of limitation'.

On the basis of the above, the claimant's orders applied for were granted.